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Economics Lecture 3 – 24/10/2007

Marginal cost = change in total cost / change in quantity.

Output – number of units produced.

Rental value – cost of capital

Wage = cost of labour.

In the short-run we assume that the cost of land and capital is fixed.

The law of diminishing marginal products for labour states that as more units of labour are employed, each unit of labour will add to output less than the previously employed unit of labour.

In the short run, assuming that capital is fixed, we can obtain 2 U-case curves.

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